The NRF is forecasting retail sales growth of 6% to 8% in 2022 for a total ranging from $4.86 trillion to $4.95 trillion. Online sales will continue to grow faster than overall retail sales, rising 11% to 13% for a total of $1.17 trillion to $1.19 trillion. NRF estimates do not include motor vehicles, gasoline and restaurants.
The association is looking ahead to strong job growth and declining unemployment in 2022, but full-year GDP growth is forecast to slow to approximately 3.5% as the Federal Reserve attempts to rein in inflation by raising interest rates and tightening monetary policy.
“This year’s pace is notably above the 10-year, pre-pandemic growth rate of 3.7%,” said Jack Kleinhenz, Chief Economist at NRF during the annual “State of Retail & the Consumer” virtual summit held on March 15, 2022. “Our outlook for retail sales reflects a lot of moving parts. The economy is balancing growth, inflation, geopolitical uncertainty and policy variability. Our view is that we expect solid economic growth to continue in the 3.5% vicinity that is adjusted for inflation.”
Matthew Shay, NRF President and CEO, expressed cautious optimism: “There are clearly many areas where challenges remain. We recognize that this pace of growth and expansion isn’t sustainable, and it may not even be healthy, but we do expect growth ahead this year.”
Inflation Hitting Lower-Income Consumers Hardest
During a panel discussion titled The Endemic Economy: What’s Next for Consumers and Retail, Ellen Zentner, Chief U.S. Economist at Morgan Stanley, noted that while tax refunds were ticking higher than in the previous season, lower-income groups would likely experience some of the biggest challenges in 2022.
“Yes, there is a lot of excess savings out there, but for the lowest income groups, they have already used up that excess savings,” said Zentner. “We’ve got really strong wage growth, healthy job gains and ultimately that is the biggest determinant of spending but inflation, inflation, inflation is going to hurt the lower income consumer disproportionally.”
Joel Prakken, Chief U.S. Economist and Co-head of U.S. Economics for IHS Markit, noted that factors such as growth in employment and wages, accumulated savings and increased household net worth would normally be cause for optimism but that the ongoing conflict in Ukraine cannot be ignored. Prices for crude oil, agricultural commodities and food could stay high due to the threat to Ukraine’s winter wheat harvest, in addition to inflated costs for fertilizer and rising natural gas prices.
“We have marked up our forecast, not so much core inflation, but headline inflation quite dramatically,” said Prakken said. “It wouldn’t surprise me at all to see year-on-year consumer price inflation this year in the 6% to 7% range. This is going to erode disposable incomes and certainly is a damper on all those other positive fundamentals for consumers.”